Non-parallel shift in the yield curve A shift in the yield curve in which yields do not change by the same
number of basis points for every maturity. Related: Parallel shift in the yield curve.

Non-reproducible assets A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.

Non-tradables Refer to goods and services produced and consumed domestically that are not close
substitutes to import or export goods and services.

Noncash charge A cost, such as depreciation, depletion, and amortization, that does not involve any cash
outflow.

Noncompetitive bid In a Treasury auction, bidding for a specific amount of securities at the price, whatever it
may turn out to be, equal to the average price of the accepted competitive bids.

Nondiversifiability of human capital The difficulty of diversifying one's human capital (the unique
capabilities and expertise of individuals) and employment effort.

Nondiversifiable risk Risk that cannot be eliminated by diversification.

Nonmarketed claims Claims that cannot be easily bought and sold in the financial markets, such as those of
the government and litigants in lawsuits.

Nonrecourse Without recourse, as in a non-recourse lease.

Nonredeemable Not permitted, under the terms of indenture, to be redeemed.

Nonrefundable Not permitted, under the terms of indenture, to be refundable.

Nonsystematic risk Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
called unique risk or diversifiable risk. Systematic risk refers to risk factors common to the entire economy.

Normal annuity form The manner in which retirement benefits are paid out.

Normal backwardation theory Holds that the futures price will be bid down to a level below the expected
spot price.

Normal deviate Related: standardized value

Normal probability distribution A probability distribution for a continuous random variable that is forms a
symmetrical bell-shaped curve around the mean.
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Normal portfolio A customized benchmark that includes all the securities from which a manager normally
chooses, weighted as the manager would weight them in a portfolio.

Normal random variable A random variable that has a normal probability distribution.

Normalizing method The practice of making a charge in the income account equivalent to the tax savings
realized through the use of different depreciation methods for shareholder and income tax purposes, thus
washing out the benefits of the tax savings reported as final net income to shareholders.

Note Debt instruments with initial maturities greater than one year and less than 10 years.

Note agreement A contract for privately placed debt.

Note issuance facility (NIF) An agreement by which a syndicate of banks indicates a willingness to accept
short-term notes from borrowers and resell these notes in the Eurocurrency markets.

Notes to the financial statements A detailed set of notes immediately following the financial statements in
an annual report that explain and expand on the information in the financial statements.

Notice day A day on which notices of intent to deliver pertaining to a specified delivery month may be
issued. Related: delivery notice.

Notification date The day the option is either exercised or expires.

Notional principal amount In an interest rate swap, the predetermined dollar principal on which the
exchanged interest payments are based.

Novation Defeasance whereby the firm's debt is canceled.

NPV See: Net present value.

NPV profile A graph of NPV as a function of the discount rate.

Objective (mutual funds) The fund's investment strategy category as stated in the prospectus. There are
more than 20 standardized categories.

Odd lot A trading order for less than 100 shares of stock. Compare round lot.

Odd lot dealer A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots.

Off-balance-sheet financing Financing that is not shown as a liability in a company's balance sheet.

Offer Indicates a willingness to sell at a given price. Related: bid

Offer price See: offer.

Offering memorandum A document that outlines the terms of securities to be offered in a private placement.

Official reserves Holdings of gold and foreign currencies by official monetary institutions.

Official statement A statement published by an issuer of a new municipal security describing itself and the
issue
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Official unrequited transfers Include a variety of subsidies, military aid, voluntary cancellation of debt,
contributions to international organizations, indemnities imposed under peace treaties, technical assistance,
taxes, fines, etc.

Offset Elimination of a long or short position by making an opposite transaction. Related: liquidation.

Offshore finance subsidiary A wholly owned affiliate incorporated overseas, usually in a tax haven country,
whose function is to issue securities abroad for use in either the parent's domestic or its foreign business.

Omnibus account An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.

On the run The most recently issued (and, therefore, typically the most liquid) government bond in a
particular maturity range.

One man picture The picture quoted by a broker is said to be a one-man picture if both the bid and offered
prices come from the same source.

One-factor APT A special case of the arbitrage pricing theory that is derived from the one-factor model by
using diversification and arbitrage. It shows the expected return on any risky asset is a linear function of a
single factor.

One-way market (1) A market in which only one side, the bid or asked, is quoted or firm. (2) A market that
is moving strongly in one direction.

Open account Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt,
and the seller records the sale in the sales ledger.

Open book See: unmatched book.

Open contracts Contracts which have been bought or sold without the transaction having been completed by
subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical
commodity.

Open interest The total number of derivative contracts traded that not yet been liquidated either by an
offsetting derivative transaction or by delivery. Related: liquidation

Open (good-til-cancelled) order An individual investor can place an order to buy or sell a security. That
open order stays active until it is completed or the investor cancels it.

Open position A net long or short position whose value will change with a change in prices.

Open repo A repo with no definite term. The agreement is made on a day-to-day basis and either the
borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject
to adjustment if rates move.

Open-end fund Also called a mutual fund, an investment company that stands ready to sell new shares to the
public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of
its portfolio, which is computed daily at the close of the market.
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Open-end mortgage Mortgage against which additional debts may be issued. Related: closed-end mortgage.

Open-market operation Purchase or sale of government securities by the monetary authorities to increase or
decrease the domestic money supply.

Open-market purchase operation A systematic program of repurchasing shares of stock in market
transactions at current market prices, in competition with other prospective investors.

Open-outcry The method of trading used at futures exchanges, typically involving calling out the specific
details of a buy or sell order, so that the information is available to all traders.

Opening, the The period at the beginning of the trading session officially designated by the exchange during
which all transactions are considered made "at the opening". Related: Close, the

Opening price The range of prices at which the first bids and offers were made or first transactions were
completed.

Opening purchase A transaction in which the purchaser's intention is to create or increase a long position in
a given series of options.

Opening sale A transaction in which the seller's intention is to create or increase a short position in a given
series of options.

Operating cash flow Earnings before depreciation minus taxes. It measures the cash generated from
operations, not counting capital spending or working capital requirements.

Operating cycle The average time intervening between the acquisition of materials or services and the final
cash realization from those acquisitions.

Operating risk The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
created by operating leverage. Also called business risk.

Operationally efficient market Also called an internally efficient market, one in which investors can obtain
transactions services that reflect the true costs associated with furnishing those services.

Opinion shopping A practice prohibited by the SEC which involves attempts by a corporation to obtain
reporting objectives by following questionable accounting principles with the help of a pliable auditor willing
to go along with the desired treatment.

Opportunity cost of capital Expected return that is foregone by investing in a project rather than in
comparable financial securities.

Opportunity costs The difference in the performance of an actual investment and a desired investment
adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able
to implement all desired trades. Most valuable alternative that is given up.
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Opportunity set The possible expected return and standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Optimal contract The contract that balances the three types of agency costs (contracting, monitoring, and
misbehavior) against one another to minimize the total cost.

Optimal portfolio An efficient portfolio most preferred by an investor because its risk/reward characteristics
approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect
to return and risk.

Optimal redemption provision Provision of a bond indenture that governs the issuer's ability to call the
bonds for redemption prior to their scheduled maturity date.

Optimization approach to indexing An approach to indexing which seeks to Optimize some objective, such
as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.

Option Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a
given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be
worth more than the price set by the option (the strike price), plus the price they paid for the option itself.
Buyers of put options bet the stock's price will go down below the price set by the option. An option is part of
a class of securities called derivatives, so named because these securities derive their value from the worth of
an underlying investment.

Option elasticity The percentage increase in an option's value given a 1% change in the value of the
underlying security.

Option not to deliver In the mortgage pipeline, an additional hedge placed in tandem with the forward or
substitute sale.

Option premium The option price.

Option price Also called the option premium, the price paid by the buyer of the options contract for the right
to buy or sell a security at a specified price in the future.

Option seller Also called the option writer , the party who grants a right to trade a security at a given price in
the future.

Option writer Option seller.

Option-adjusted spread (OAS) (1) The spread over an issuer's spot rate curve, developed as a measure of
the yield spread that can be used to convert dollar differences between theoretical value and market price. (2)
The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the
base yield spread of an MBS without an operative call produces the option-adjusted spread.

Options contract A contract that, in exchange for the option price, gives the option buyer the right, but not
the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within a
specified time period, or on a specified date (expiration date).

Options contract multiple A constant, set at $100, which when multiplied by the cash index value gives the
dollar value of the stock index underlying an option. That is, dollar value of the underlying stock index = cash